DIVO: The Fund Should Face Challenges This Year

seekingalpha06-05

Investing environment is volatile, making capital allocation difficult.Traditional investing strategies are turning to alternative options like covered call funds.Amplify CWP Enhanced Dividend Income ...

Source Link

Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.

Comments

We need your insight to fill this gap

Leave a comment

{"i18n":{"language":"en_US"},"isChannel":false,"data":{"share":"https://ttm.financial/m/news/2441210635?lang=en_US&edition=fundamental","thumbnail":"https://static.seekingalpha.com/cdn/s3/uploads/getty_images/1706231587/image_1706231587.jpg","is_english":true,"pubTime":"2024-06-05 14:31","share_image_url":"https://static.laohu8.com/5a36db9d73b4222bc376d24ccc48c8a4","id":"2441210635","market":"sg","top_or_hot":-1,"title":"DIVO: The Fund Should Face Challenges This Year","media":"seekingalpha","content":"<div>\n<p>Investing environment is volatile, making capital allocation difficult.Traditional investing strategies are turning to alternative options like covered call funds.Amplify CWP Enhanced Dividend Income ...</p>\n\n<a href=\"https://seekingalpha.com/article/4697471-divo-etf-fund-should-face-challenges-this-year\">Source Link</a>\n\n</div>\n","source":"seekingalpha","html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>DIVO: The Fund Should Face Challenges This Year</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nDIVO: The Fund Should Face Challenges This Year\n</h2>\n\n<h4 class=\"meta\">\n\n\n2024-06-05 14:31 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4697471-divo-etf-fund-should-face-challenges-this-year><strong>seekingalpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>Investing environment is volatile, making capital allocation difficult.Traditional investing strategies are turning to alternative options like covered call funds.Amplify CWP Enhanced Dividend Income ...</p>\n\n<a href=\"https://seekingalpha.com/article/4697471-divo-etf-fund-should-face-challenges-this-year\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"LU0128525929.USD","symbol_name":"TEMPLETON GLOBAL \"A\" (USD) ACC","start_time":0,"source_url":"https://seekingalpha.com/article/4697471-divo-etf-fund-should-face-challenges-this-year","article_id":"2441210635","we_media_id":null,"thumbnails":["https://static.seekingalpha.com/cdn/s3/uploads/getty_images/1706231587/image_1706231587.jpg"],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=2441210635","pubTimestamp":1717569072,"sourceInfo":{"source_id":"seekingalpha","name":"Seeking Alpha"},"weMediaInfo":null,"summary":"Investing environment is volatile, making capital allocation difficult.Traditional investing strategies are turning to alternative options like covered call funds.Amplify CWP Enhanced Dividend Income ","collect":0,"end_time":0,"defaultTopTitle":"seekingalpha.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"LU0128525929.USD":"TEMPLETON GLOBAL \"A\" (USD) ACC",".SPX":"S&P 500 Index","IE00BJJMRX11.SGD":"Janus Henderson Balanced A Acc SGD","OEX":"标普100","IE00BJTD4V19.USD":"NEUBERGER BERMAN US LONG SHORT EQUITY \"A1\" (USD) ACC","LU1670628061.USD":"M&G (LUX) NORTH AMERICAN DIVIDEND \"A\" (USD) INC","SSO":"两倍做多标普500ETF","LU0889565833.HKD":"FRANKLIN TECHNOLOGY \"A\" (HKD) ACC","LU0079474960.USD":"联博美国增长基金A","SPXU":"三倍做空标普500ETF","LU0310800379.SGD":"FTIF - Templeton Global A Acc SGD","IE00B19Z3B42.SGD":"Legg Mason ClearBridge - Value A Acc SGD","LU0061474960.USD":"天利环球焦点基金AU Acc","LU1280957306.USD":"THREADNEEDLE (LUX) US CONTRARIAN CORE EQUITIES \"AUP\" (USD) INC","OEF":"标普100指数ETF-iShares","LU0122379950.USD":"贝莱德世界健康科学A2","IE00BBT3K403.USD":"LEGG MASON CLEARBRIDGE TACTICAL DIVIDEND INCOME \"A(USD) ACC","LU0310799852.SGD":"FTIF - Templeton Global Equity Income A MDIS SGD","LU0171293334.USD":"贝莱德英国基金A2","LU0320765646.SGD":"FTIF - Franklin Income A MDIS SGD-H1","SDS":"两倍做空标普500ETF","IE0004445015.USD":"JANUS HENDERSON BALANCED \"A2\" (USD) ACC","LU0106831901.USD":"贝莱德世界金融基金A2","FDN":"First Trust Dow Jones Internet I","LU0511384066.AUD":"SUSTAINABLE GLOBAL THEMATIC PORTFOLIO \"A\" (AUDHDG) ACC","MSFT":"微软","IVV":"标普500指数ETF","SPY":"标普500ETF","SH":"标普500反向ETF","BK4567":"ESG概念","LU1244550221.USD":"FRANKLIN GLOBAL MULTI-ASSET  INCOME \"A\" (USDHEDGED) INC (M)","LU0690374961.EUR":"FUNDSMITH EQUITY \"R\" (EUR) INC","LU0211327993.USD":"TEMPLETON GLOBAL EQUITY INCOME \"A\" (USD) ACC","LU0708995401.HKD":"FRANKLIN U.S. OPPORTUNITIES \"A\" (HKD) ACC","LU0354030511.USD":"ALLSPRING  U.S. LARGE CAP GROWTH \"I\" (USD) ACC","LU0149725797.USD":"汇丰美国股市经济规模基金","LU0690374615.EUR":"FUNDSMITH EQUITY \"R\" (EUR) ACC","DIVO":"Amplify YieldShares CWP Dividend & Option Income ETF","UNH":"联合健康","BK4566":"资本集团","IE00BJTD4N35.SGD":"Neuberger Berman US Long Short Equity A1  Acc SGD-H","LU0354030438.USD":"富国美国大盘成长基金Cl A Acc","IE0009356076.USD":"JANUS HENDERSON GLOBAL TECHNOLOGY AND INNOVATION \"A2\" (USD) ACC","V":"Visa","LU1496350171.SGD":"FRANKLIN DIVERSIFIED BALANCED \"A\" (SGDHDG) ACC","LU":"陆金所","LU0211328371.USD":"TEMPLETON GLOBAL EQUITY INCOME \"A\" (MDIS) (USD)   INC","LU0114720955.EUR":"SUSTAINABLE GLOBAL HEALTH CARE \"A\" INC","UPRO":"三倍做多标普500ETF"},"translate_title":"DIVO：该基金今年应面临挑战","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"V":1,"MSFT":1,"SPY":1,"UNH":1,"DIVO":1,"FDN":0.9,"OEF":0.6,"OEX":0.6,"SDS":0.6,"SH":0.6,"SPXU":0.6,"UPRO":0.6,"SSO":0.6,"LU":0.6,"ESmain":0.6,"IVV":0.6,".SPX":0.6},"content_text":"Investing environment is volatile, making capital allocation difficult.Traditional investing strategies are turning to alternative options like covered call funds.Amplify CWP Enhanced Dividend Income ETF has performed well since its inception in 2016.   Torsten Asmus The investing and economic environment have become more volatile over the last year. With growth forecasts increasingly uncertain, an upcoming presidential election in the US, and the Fed committed to keeping rates high, allocating capital is more difficult. With the S&P 500 (SPY) and most of the broader indexes at or near record highs, many traditional investing strategies such as dividend-focused approaches are turning towards alternative financial options. An approach that many income investors have turned to is to allocate capital to covered call funds. One well-known covered call fund that has performed well since the ETF's inception in December of 2016 is the Amplify CWP Enhanced Dividend Income ETF (NYSEARCA:DIVO). DIVO has performed reasonably over the last 7 years. Data by YCharts DIVO is up 128.62% as measured by total returns since 2016, while the S&P 500 has risen 175.54% during this same time period. I last wrote about DIVO in June of 2023, and I rated the fund a hold primarily because of the ETF's overweight position in more cyclical sectors when signs of a slowdown in growth in the US and abroad were building. I am downgrading this fund to a sell today. There are increasing signs of consumer spending rates slowing in the US, and the technology sector also looks overvalued for several reasons. DIVO also only uses a covered call strategy to generate modest income, the fund is not likely to benefit significantly from increased levels of volatility. DIVO has an expense ratio of .56%, the fund has $3.21 billion in assets under management, and the current yield is 4.61%. The fund's allocation is 20.22% to the financials, 16.71% to the technology sector, 15.13% to the healthcare sector, 12.70% to consumer cyclicals, 11.49% to the industrial sector, 9.20% in consumer defensives, 7.86% to energy stocks, 2.96% to basic materials, 2.56% to communication stocks, and 1.16% to the Utility sector. A Chart of DIVO's Holdings (amplifyetfs.com) DIVO only has 36 holdings and the top 10 holdings make up nearly 54% of the assets of the overall fund. The ETF's top 4 equity holdings are Visa (V), UnitedHealth Group (UNH), Microsoft (MSFT), and JPMorgan Chase and Co (JPM). These top 4 stock holdings make up nearly 20% of the fund's assets.   A Chart of US GDP Growth (U.S. Bureau of Economic Analysis)A List of DIVO's Holdings (amplifyetfs.com) DIVO also uses a selective out-of-the-money call option strategy that sells contracts against 20% of the fund's holdings. Mangers sell call options at their discretion and ETF sells out-of-the-money contracts. The fund seeks to get 2-3% of the income from the ordinary dividends, and 2-4% of the income from selectively selling covered calls against specific stocks. The fund's income is taxed as return of capital and qualified dividend tax of 5% and 15% depending on a person's income bracket. Return of capital income means the income lowers a person's adjusted cost basis and then the individual will pay taxes at the capital gains rate when they sell the asset. DIVO is heavily overweight more cyclical sectors such as the technology industry, the consumer cyclical sector, the industrials, and the financials. Growth rates have slowed for three consecutive quarters. While consumer spending data remains mixed, credit card defaults are rising and most people are now priced out of the housing market because of increased rates and higher housing prices.   A Chart of US GDP Growth (US Bureau of Economic Analysis) The Fed has also recently signaled that rates are likely to remain higher for a longer period of time because of inflation concerns. Even though energy prices have fallen recently, oil and gas prices traditionally rise in the summer months as travel levels increase and demand goes up. Inflation data remains mixed, with oil prices falling recently, but the producer price index coming in above expectations at .5% in May. Big-cap tech is also trading at historically high valuations. Microsoft is trading at nearly 35x expected forward GAAP earnings estimates, Apple is trading at nearly 28x predicted forward GAAP earnings estimates, and NVIDIA is trading at nearly 39x forecasted forward GAAP earnings estimates. NVIDIA and Microsoft are both trading at premiums to the average 5-year valuation levels of these companies. Apple is also trading at a significant growth multiple, even though analysts are forecasting the tech leader to only grow revenues at 6-7% over the next four years. Large-cap tech also has significant exposure to the Chinese economy, and the consensus is for the second-largest economy in the world to continue to see slower growth this year as well, with recent downgrades to the economic outlook for China's economy. This sector gets nearly 60% of the sector's earnings from outside of the US as well, and these companies have significant exposure to forex moves. With the ECB taking a more dovish tone on rates and the US economy still stronger than the economy in the EU, the dollar is likely to continue to rise this year.  DIVO has nearly 70% of the fund's assets allocated to more cyclical sectors, and the fund only gets a marginal amount of income from selling out-of-the-money call options, the fund is not well positioned for a slowdown. While this ETF has performed reasonably well over the last 8 years, investors should be able to find better value in the current investing environment.","kind":null,"is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"0","news_tag":"","news_rank":0,"symbols":[],"gpt_button":1},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.29.1","shortVersion":"4.29.1","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2441210635"}